Following on from a tumultuous year, volatility and uncertainty were predicted to be persistent themes throughout 2024 – and the predictions were right.
But while a rocky year was not unexpected, a number of major events did manage to both shock and surprise us. Here’s a look back at the biggest issues that caught many off guard in 2024.
Private credit balloons
The private credit universe is expected to expand rapidly, with the birth of private credit exchange traded-funds (ETF) and major partnerships between traditional banks and asset managers fuelling growth that could nearly double its size in the coming years.
In October, the Reserve Bank of Australia estimated that the private credit market in Australia stands at some $40 billion and is worth around 2.5 per cent of total business debt. Meanwhile, work by the Australian Securities and Investments Commission (ASIC) to improve transparency is expected to assist in monitoring growth in the asset class.
Also in recent months, subsidiaries of Apollo Global, in collaboration with State Street, filed with the US Securities and Exchange Commission for a private credit ETF aimed at democratising access to this asset class, targeting not just high-net-worth individuals but investors across all income levels.
At the same time, some warn that the rapid growth of private credit could attract heightened regulatory scrutiny.
“For today’s ambitious alt asset managers, it will be increasingly critical to ensure that risk management oversight keeps pace with fast-evolving growth into more regulatory sensitive parts of the market, such as more ‘mum and pop’ retail investors,” Moody’s said in October.
Valued at some US$1.5 trillion globally today, Moody’s expects private credit to grow to US$3 trillion over the next three years.
Greenwashing faces increasing scrutiny
Marking ASIC’s first greenwashing court victory, the Federal Court ruled in March that Vanguard broke the law by making misleading claims about certain environmental, social and governance exclusionary screens applied to investments in an index fund run by the firm. The fund manager was later penalised $12.9 million.
Since then, the regulator initiated civil penalty proceedings against Active Super and concluded a case against Mercer Super with an $11.3 million penalty.
Good intentions or honest mistakes won’t protect funds from greenwashing claims, highlighting the rising regulatory risk, John Moutsopoulos, partner at Mills Oakley, recently noted.
“That focus puts ASIC on a potential collision course with many super funds and fund managers who currently have or intend to have a public-facing sustainability profile,” Moutsopoulos said in a note from September.
Looking ahead, the regulator has underscored the “ample room for improvement” in the space, with greenwashing holding up as a key priority in ASIC’s corporate plan.
Bitcoin wars
Bitcoin’s price has moved at a blistering pace in 2024, seeing triple-digit gains and surpassing US$100,000 in December.
With the price of bitcoin still supported by the decision the US regulator made in January to allow ETFs that hold bitcoin to begin trading, bitcoin ETFs have also seen similar success. However, this year saw some contention about the differing characteristics of such products in Australia.
Monochrome Asset Management in June announced the official launch of the Monochrome Bitcoin ETF (IBTC) on the Cboe Australia exchange, operating under the ticket “IBTC”.
Jeff Yew, the CEO of Monochrome, asserted that this is Australia’s first ETF to hold bitcoin directly, highlighting that never before has a local ETF held the asset at the “fund level”.
But more than two years ago, in April 2022, the Global X 21Shares Bitcoin ETF (EBTC) similarly dubbed itself as the first Australian ETF to invest directly in bitcoin.
Since then, several other fund managers have debuted either bitcoin or cryptocurrency products, including VanEck and Digital X, with their overall popularity said to be soaring on the back of the rising price of the cryptocurrency.
Trump’s re-election in November has fuelled the digital asset’s popularity even further, with expectations of eased regulation expected to drive the price of bitcoin forward well into 2025. In response, Australia is seeking regulatory certainty, amid growing concerns that it could be left behind as cryptocurrency moves further into the mainstream.
Companies consolidate
The investment management industry has experienced a surge of M&A activity in 2024, with some takeovers finalised, others still in negotiations, some attracting offshore buyers, and a few ultimately scrapped.
Big four banks also came into the fold, chiefly with ANZ’s finalised acquisition of Suncorp. Meanwhile, local super funds, particularly corporate funds, are either finalising or are well on their way to completing negotiations with merger partners.
Notably, in November, Parliament passed the Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024, marking the most significant change to Australia’s merger regime since the Trade Practices Act was enacted half a century ago.
The new rules won’t kick into effect until 1 January 2026, but companies will be able to use them on a voluntary basis from 1 July next year.
In 2024, the fund management sector also saw significant shifts, including deal disruptions such as Perpetual’s uncertain position with KKR due to tax-related concerns. Moreover, just days before Perpetual’s announcement, Platinum confirmed that Regal decided not to pursue the acquisition of the fund manager after completing due diligence.
On the superannuation front, Betashares formally entered the industry with a major acquisition and funds continued to consolidate with concerns growing over the sheer size of some funds and their exposure to illiquid assets.
